J&J Gains Next-Gen CoStar Stent Through $1.4 Bil. Conor Purchase

Acquisition could bolster the stent portfolio of Johnson & Johnson's Cordis unit, helping it retain top-tier market share as a flurry of new competitors joins the market. Conor expects to submit an application to FDA next year for its paclitaxel-eluting, cobalt-chromium coronary stent with a bioabsorbable polymer coating, which has yet to show any cases of late stent thrombosis in clincial trials.

Johnson & Johnson hopes that its $1.4 bil. purchase of next-generation drug-eluting stent developer Conor Medsystems will help it retain top-tier market share as a flurry of new competitors joins the market.

Conor will bolster the stent portfolio of J&J's Cordis unit "both immediately with its innovative CoStar drug-eluting stent and over the long-term with its unique drug delivery technology," J&J Worldwide Chairman-Cardiovascular Devices & Diagnostics Nicholas Valeriani said Nov. 17.

Conor expects to submit a PMA next year for its CoStar paclitaxel-eluting, cobalt-chromium coronary stent with a bioabsorbable polymer coating. The firm projects that the device, which debuted in Europe in February, will launch in the U.S. by late 2007 or early 2008. Conor has already started ramping up production in anticipation of approval.

The stent design is unique in that it incorporates many small holes that serve as reservoirs that can be loaded with drugs for site-specific delivery.

J&J currently controls roughly half of the $5.5 bil.-$6 bil. worldwide drug-eluting stent market with its Cypher sirolimus-eluting stent, sharing the field primarily with Boston Scientific's Taxus paclitaxel-eluting stent.

While both firms face market share erosion in coming years as competitors enter the market, Boston Scientific has appeared better positioned than J&J. However, with Conor, J&J says it is "positioned to lead the development of next-generation technologies aimed at advancing the standard of care."

JP Morgan analyst Michael Weinstein recently projected 19% and 12% U.S. DES market shares for J&J and Conor, respectively, by 2009 - or 31% combined. This compares to a similar 31% projected 2009 market share for Boston Scientific, the analyst said in an Oct. 3 report. However, J&J's established market presence could help magnify the potential appeal of CoStar, moving J&J ahead.

Competitors entering the market include Abbott, which launched its Xience everolimus-eluting stent in Europe in October and is preparing for a U.S. launch in 2008. Boston Scientific will offer a version of the device under the Promus label under a marketing agreement.

Medtronic debuted its Endeavor zotarolimus-eluting stent in Europe in August 2005 and expects a U.S. launch in 2007.

While DES market growth has been hampered in recent months over concerns about the potential for increased risk of late stent thrombosis, CoStar could help sidestep such issues. Two year follow-up from Conor's EuroSTAR study of CoStar showed no cases of stent thrombosis.

Medtronic also claims that no late stent thrombosis has been observed in its Endeavor trials.

Conor plans to seek approval of CoStar based on data from the its CoStar II trial comparing the device with Taxus Express .

In addition to CoStar, J&J gains access to Conor's earlier stage Corio pimecrolimus-eluting stent and SymBio pimecrolimus/paclitaxel-eluting stent. Conor licensed the inflammation-preventing pimecrolimus drug from Novartis in March. Both stents use the firm's reservoir delivery system and are being compared to CoStar in the firm's ongoing Genesis trial.

While J&J's market presence provides a natural fit for early-stage Conor, J&J's deep pockets also could come in handy in addressing potential patent hurdles in the highly litigious stent field. Conor is facing patent-related disputes in the U.S., UK, Netherlands, Australia and Ireland involving Boston Scientific and Angiotech.

While Conor currently has distribution deals with Biotronik in Europe and St. Jude in Japan, J&J says it will review those deals on a case-by-case basis.

Under the terms of the Conor deal, J&J will pay $33.50 per share for the company - a roughly 22% premium over its Nov. 16 closing price of $27.52. The purchase deal is expected to close in the first quarter of 2007 pending Conor stockholder approval and antitrust clearance. Conor generated $10.7 mil. in revenue for the third quarter, with a net loss of $10.1 mil.

- Adosh Unni ([email protected])